“It has just started and we are in a commodity supercycle for the next 5-7 years. However, forget the supercycle, if you base yourself on last quarter’s prices; today steel prices are 20-25 percent higher than the average realization of last quarter. Companies could see earnings of Rs 200-300 per share,” he reasoned.
China announced intentions to release industrial metals from its national reserves to restrain commodity prices.
“Good cement stocks are valued at 30-40 times earnings, steel stocks are valued at 5-7 times earnings and people are doubting it. I am not talking about today’s prices, I am talking about last quarter prices. Everybody knows that cement stocks are going to prosper and steel prices are going to come down and they are not going to last; until there is doubt the prices are just going to go up. I am not bullish but extremely bullish on metal stocks both from earnings and valuation point of view,” said Jhunjhunwala.
Global brokerage Jefferies has a similar point of view and maintains a buy call on Tata Steel with the target at Rs 1,500 per share.
“Tata Steel’s FY21 annual report shows a rising focus on sustainability and also sets out specific targets for 2025/2030. India capacity expansion is a key strategic focus with the company working on separating the UK and Netherlands businesses,” Jefferies has noted.
Jhunjhunwala also gave a disclaimer, which is important to note here.
“I want to make a disclosure that I am an interested party and everything I say, please take it with a pinch of salt,” he said.
(Edited by : Abhishek Jha)
First Published: IST